On August 2, 2021 and September 10, 2021, the Company completed the DigitalCrafts and Hippo acquisitions, respectively.

DigitalCrafts, launched in 2015, helps provide individuals an opportunity in the technology area through reskilling and upskilling courses within the areas of web development, web design and cybersecurity. DigitalCrafts’ programs are now offered by AIU under the ‘DigitalCrafts’ name. On the date of acquisition, the Company made a cash payment of $16.3 million for the DigitalCrafts assets. The initial payment was fully funded with the Company’s available cash balances. Pursuant to the acquisition agreement, a post-closing contingent consideration payment of up to $2.5 million is expected to be paid in early 2024 based upon the achievement of certain financial metrics.

The preliminary purchase price of $18.4 million for the DigitalCrafts assets consists of the initial purchase price of $16.3 million, the preliminary fair value calculation of contingent consideration of $1.9 million, and a working capital adjustment. The preliminary purchase price was allocated to estimated fair values of acquired tangible and identifiable intangible assets of $20.0 million and assumed liabilities of $1.7 million as of August 2, 2021. Provisional intangible assets acquired include a trade name with an estimated fair value of approximately $0.7 million with an estimated useful life of 5 years and customer relationships and developed technology with an aggregate estimated fair value of $1.0 million with estimated useful lives of 3 years each. We are in the process of finalizing third-party valuations of certain intangible assets and contingent consideration. Thus, the provisional measurements of intangible assets, goodwill and contingent consideration as well as the estimated useful lives are subject to change. Based on our preliminary purchase price allocation, we have recorded goodwill of $16.5 million. Goodwill reflects the revenue growth opportunities following the acquisition. We expect substantially all of this goodwill balance to be deductible for income tax reporting purposes. Subsequent adjustments may be made to the purchase price allocation once the fair values of acquired assets and liabilities, as well as the fair value of contingent consideration, are finalized.

Hippo, founded in 2011, is a provider of continuing medical education and exam preparation for medical professionals with a quality technology platform and strong course content. Hippo programs are now offered by CTU under the ‘Hippo Education’ name. On the date of acquisition, the Company made an initial cash payment of $42.0 million. Pursuant to the terms of the acquisition agreement, $1.2 million of this payment was set aside in an escrow account to secure indemnification obligations of the seller after closing and is reflected as restricted cash on our condensed consolidated balance sheets. The initial payment was fully funded with the Company’s available cash balances. Additionally, pursuant to the purchase agreement, a post-closing contingent consideration payment of up to $4.0 million is expected to be paid in early 2024 based upon the achievement of certain financial metrics.

The preliminary purchase price of $43.3 million for Hippo represents the initial purchase price of $42.0 million as well as the preliminary fair value calculation of contingent consideration of $1.3 million. The preliminary purchase price was allocated to estimated fair values of acquired tangible and identifiable intangible assets of $47.7 million and assumed liabilities of $4.3 million as of September 10, 2021. Provisional intangible assets acquired include a trade name with an estimated fair value of approximately $3.3 million with an estimated useful life of 10 years, customer relationships with an estimated fair value of approximately $14.1 million with an estimated useful life of 7 years and developed technology with an estimated fair value of $2.0 million with an estimated useful life of 4 years. We are in the process of obtaining third-party valuations of certain intangible assets and contingent consideration. Thus, the provisional measurements of intangible assets, goodwill and contingent consideration as well as the estimated useful lives are subject to change. Based on our preliminary purchase price allocation, we have recorded goodwill of $27.9 million. Goodwill reflects the revenue growth opportunities following the acquisition. We expect substantially all of this goodwill balance to be deductible for income tax reporting purposes. Subsequent adjustments may be made to the purchase price allocation once the fair values of acquired assets and liabilities, as well as the fair value of contingent consideration, are finalized.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of August 2, 2021 and September 10, 2021 (dollars in thousands):

	DigitalCrafts		Hippo
Assets:	August 2, 2021		September 10, 2021
Cash	$	-	$	93
Student receivables		1,777		202
Other current assets		4		25
Property and equipment		-		27
Intangible assets subject to amortization
Trade name		740		3,340
Customer relationships		200		14,100
Developed technology		830		1,960
Goodwill		16,477		27,903
Total assets acquired	$	20,028	$	47,650
Liabilities:
Accounts payable and other accrued liabilities	$	268	$	378
Deferred revenue		1,404		3,952
Total liabilities assumed	$	1,672	$	4,330

Net assets acquired	$	18,356	$	43,320